It's time for cooperative leaders to act. Four years and five conservatorships into the corporate credit union workout, recently posted NCUA data shows these corporates collectively have more than $2.9 billion remaining in total capital. The Temporary Corporate Credit Union Stabilization Fund (TCCUSF) contains an additional positive balance of more than $15.5 billion. This total is arrived at after subtracting the outstanding NCUA Guaranteed Note (NGN) liabilities and actual investment losses from the $40 billion legacy assets and then adding the $3.3 billion in TCCUSF premiums collected from credit unions.
Even after subtracting NCUA’s theoretical highest future loss estimate, there is still a positive balance in the TCCUSF of more than $3.0 billion. Yet NCUA still projects future premium assessments of $1.9 billion to $6.2 billion. (You can find all this data on NCUA’s website at http://www.ncua.gov/Resources/Corps/NGN/Pages/Metrics.aspx).
The Challenge For The Cooperative System
This issue is about more than numbers, although billions of dollars in member funds is at stake. In a cooperative system, member-owners must be eternally vigilant on behalf of current and future generations. If they’re not, the system will lose its way. If credit union leaders don’t watch out for the system, who will?
NCUA has publicized its efforts to go after the persons it deemed responsible for the investment losses at the corporates. But in the end, will NCUA be responsible for the largest loss of all? NCUA's liability is clear. It seized more than $50 billion in member assets and issued Receiver’s Certificates for the positive balances. The agency’s own published numbers show billions are due back to credit unions and their members.
Some in the industry want to put the corporate issues behind them rather than asking for contemporary accounting. They want to leave the outcome to future NCUA boards. This could be the biggest error in the corporate episode. Gross mismanagement and waste of cooperative assets — whether by a credit union CEO or a Presidentially appointed board using a regulator’s license — requires public accountability.
Action For The Future, Not The Past
NCUA manages more credit union assets than the largest credit union in America. My belief in the potential advantage of an effective cooperative regulator is well-known. My hopes for the contribution credit unions can make to the future of America are equally well-known.
However, I am dismayed by system leadership that allows NCUA’s lack of accountability. As cooperatives, credit unions are about peer ownership. The responsibilities of ownership are not limited to assets. We must also guard what is right and just for the future of our communities.
Has the situation with the corporates become so complicated, complex, and convoluted that NCUA cannot manage to report activity on a current basis? If that is not the situation, why doesn’t NCUA follow the same minimum reporting it requires even the smallest credit union to follow?
In issuing TARP funds, the government took unprecedented action during a financial crisis. Congress then appointed an independent Special Inspector General to oversee the funds and provide quarterly reports. The requirement was completely outside traditional government practice but was necessary because of the sums at stake and the decisions government was making using taxpayer funds.
For credit unions, the amount of member funds NCUA is overseeing is likewise unprecedented. However, there is not, and never has been, timely reporting or independent oversight. These are members’ funds taken from credit union balance sheets. To be a regulator of a cooperative system requires more than closed door plans and takeovers — it requires leadership that respects cooperative values, cooperative ownership, and democratic governance.
I hope it is not too late for NCUA to claim the high ground. At some point in the future, someone will make the call on the management of these events and the legitimacy of NCUA actions. If the board and senior management of NCUA cannot provide leadership, then it is up to credit unions to do so. With one another, with Congress, with state leagues, and with all three trade associations now is the time to demand a full and independent cooperative review board to examine all of the funds taken and spent.
Although not all facts are in, we know enough to ask whether NCUA acted with haste and waste or as a prudent steward of assets. The agency swapped potential, unknowable future losses for immediate charges that extinguished corporate’s capital accounts and levied an additional $3.3 billion in insurance premiums. Future cooperative leaders and volunteers need to know the system they serve is able to perform a valid post mortem on an event of this magnitude. Click here to read A Review Of NCUA’s Corporate Actions Must Be A High Priority..